Law: Income Tax Act, 1961

Section: 41(2)

Law: Income Tax Act, 1922

Section: 10(2)(vii)

Section 41(2) of the Income-tax Act, 1961 [Corresponding to section 10(2)(vii) of the Indian Income-tax Act, 1922] - Balancing charge - Assessment year 1947-48 - Whether an article which was in use at particular time does not require that it was actively employed during time in producing result for which it was meant - Held, yes - Whether where trucks were sold by assessee-firm on first day of relevant accounting year and such trucks had admittedly been in use upto few hours before their sale and they were not put out of use sale must be held to be sale of plant used for purposes of assessee's business and thus excess profit realized by assessee on sale of said trucks than their written down value could be deemed to be profits under section 10(2)(vii) of 1922 Act together with second proviso thereto - Held, yes Words and phrases : Word 'used' as occurring in section 10(2)(vii) of the Indian Income-tax Act, 1922 FACTS The assessee firm was carrying on the business of plying motor trucks and lorries on hire. On first day of accounting year relevant to the assessment year 1947-48, it sold two trucks. The difference between the original cost and the written down values of the two trucks were not known, but they were admittedly greater than the profits earned by the assessee on said sale. The assessee had made a profit from its business of hiring out trucks. The ITO assessed it on the whole of this amount, applying the provision of section 10(2)(vii) of 1922 Act read with the second proviso thereto. He rejected the assessee's contention that the second proviso was inapplicable because the trucks were sold on the very first day of the previous year and, therefore, could not be said to have been used during the previous year for the purposes of the business within the meaning of section 10(2)(vi), (v ) and (vi). The Tribunal held that the mere fact that the trucks were sold on the first day did not necessarily mean that they were not kept available for use on that day and that "used" within the meaning of section 10(2)(iv), (v ) and (vi) includes passive use also. On reference : HELD An article which was in use at a particular time does not require that it was…

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